WTI futures hover near 6-month low on rising U.S. stockpiles, Libyan supply worries support

West Texas Intermediate traded near the lowest level since early June after the Energy Information Administration reported that crude inventories in the U.S. rose for a tenth consecutive week in the seven days to November 22 as the countrys output surged to the highest in almost 25 years. Prices however drew support on ongoing protests and clashes in Libya, which have kept the African countrys production at a fraction of its capacity. A larger-than-expected drop in initial jobless benefits filings in the U.S. last week also underpinned prices but continued weakness in business spending on capital goods suggested slower growth in the fourth quarter.

On the New York Mercantile Exchange, WTI crude for delivery in January fell by 1.49% to $92.28 per barrel by 8:06 GMT. Prices shifted in a days range between $92.09 and $92.40 per barrel. The U.S. benchmark plunged to a six-month low of $91.79 on Wednesday and settled the day 1.4% lower, the biggest daily decline since November 1, extending its weekly loss to nearly 2.7%.

Meanwhile on the ICE, Brent futures for settlement in the same month traded at $111.43 per barrel at 8:07 GMT, up 0.10% on the day. Prices held in a narrow range between days high of $111.57 and session low at $111.32. The European benchmark jumped by nearly 0.5% on Wednesday and extended its weekly advance to 0.7% on Thursday. Brents premium to its U.S. counterpart widened to over $19, the highest in more than eight months based on closing prices.

West Texas Intermediate crude was pressured down after the Energy Information Administration reported yesterday a larger-than-expected increase in U.S. crude stockpiles in the seven days to November 22. Crude inventories jumped by 3 million barrels last week, a tenth consecutive weekly advance, exceeding the median estimate of 11 analysts surveyed by Bloomberg for a 750 000 barrels increase. At 391.4 million barrels, inventories were at the highest level since June and above the upper limit of the average range for this time of the year.

Stockpiles at Cushing, Oklahoma, the biggest U.S. storage hub and delivery point for NYMEX-traded contracts, rose by 676 000 barrels to 40.6 million, the highest level since July.

Jonathan Barratt, the chief executive officer of Barratt’s Bulletin in Sydney, commented for Bloomberg: “Inventories continue to build, and that’s certainly at the forefront of investors’ minds. The oil market is suffering from no demand and oversupply.”

U.S. crude production surged by 45 000 bpd to 8.02 million bpd, reaching the highest level in almost 25 years. Increasing U.S. self-sustainability resulted in declining imports. Inbound shipments were at 7.7 million barrels per day last week, down 145 000 bpd from the preceding period. Imports averaged 7.7 million bpd over the last four weeks and were 3.5% below the same period a year earlier.

“Thats the next big question – how do you find a home for all the oil that US has and will stop importing?” said Barratt, cited by CNBC. “Thats the elephant in the room.”

Refinery utilization rose to 89.4%, up from 88.6% during the preceding week. Both gasoline and distillate fuel production increased in the seven days through November 22, averaging 9.4 and 5.0 million barrels per day, respectively.

Motor gasoline inventories jumped by 1.8 million barrels last week to 210.6 million, exceeding projections for a moderate 500 000 barrels gain. Distillate fuel supplies fell by 1.7 million barrels to 110.9 million, beating expectations for a 1 million drop.

U.S. data

Two separate reports by the Labor and the Commerce Departments sent investors mixed signals on Wednesday. The Labor Department reported that the number of Americans who filed for initial unemployment benefits fell by 10 000 to a two-month low of 316 000 in the week ended November 23, defying analysts’ projections for an increase to 330 000.

The four-week moving average, which smooths out weekly volatility, fell by 7 500 to 331 750, indicating a steady improvement in the U.S. labor market. The insured unemployment rate, which includes the jobless people eligible for aid, fell to 2.1% in the week ended November 16, down from 2.2% in the previous period.

However, the Commerce Department reported that orders for U.S. durable goods fell in October, coinciding with recent reports which suggested confidence in the U.S. was hurt last month by the 16-day government shutdown. Bookings for goods set to last at least three years fell by 2.0% in October as demand for civilian and defense aircraft plunged, marking a major retreat from September’s upward-revised 4.1% advance. Analysts expected a 1.9% contraction.

Demand for non-defense capital goods orders ex aircraft, a gauge for future business investment in computers and other equipment, fell by 1.2% in October after they retreated by 1.4% in September, suggesting economic growth may slow in the fourth quarter, hurting demand for oil in the worlds top consumer.

Libya supply worries

The oil market, and mainly the Brent benchmark, continued to draw support on supply worries from Libya, the holder of Africas biggest crude reserves. Libyan civil servants, oil workers and private sector employees went on a strike in the port city of Benghazi on Tuesday, protesting against insufficient security after clashes between the Libyan army and armed militants in Benghazi on Monday resulted in the death of at least nine people.

Output in the African country fell to an average of 450 000 barrels of oil per day in October, down from 1.45 million bpd a year earlier, according to estimates from Bloomberg.

Libyas Prime Minister Ali Zeidan said the government may not be able to pay civil servants salaries and may have to seek loans if militias continue to block oilfields and export terminals, crippling the nations production and exports, its main source if revenues.

Also fanning negative sentiment, 18 out of 20 analysts and traders surveyed by Bloomberg expected OPEC to reaffirm its production target of 30 million bpd at its next meeting on December 4. The group pumped 30.62 million barrels per day in October, slightly up from September’s 30.58 million bpd.